Small miners enjoy profit season

Reporting season is generally not as crucial to resources stocks as it is for other sectors, but this time around investors have been sensitive to information and outlook statements released by some small and mid-tier miners.

Some miners have managed to avoid the bumps and bruises of reporting season and are looking to post significant gains for February. Most mining companies disclose production and costs details in their quarterly activity statements, which are typically the basis for analysts’ estimates.

OceanaGold Corporation (OGC)

It might be riding on the coat tails of a rallying gold price, but Pacific Rim gold producer
OceanaGold
has been the best-performing stock among the smaller miners. The stock has risen by more than 25 per cent this month, loosely tracking the gold price, to a 10-month high of $2.46 posted last week.

The precious metal has restored some of its value in recent weeks after slumping from all-time highs reached in early December. And the company is positioning itself to benefit from further appreciation in the gold price after deciding last week to close its hedge book.

The impressive run has even attracted the attention of the big end of town with JPMorgan Asset Management increasing its exposure to the stock to 5.45 per cent.

OceanaGold produced more than 300,000 ounces of gold from its New Zealand operations in 2009 and expects to produce a minimum of 270,000 to 290,000 ounces in 2010.

OceanaGold posted a significant turnaround in earnings last week, releasing an unaudited $US54.5 million ($60.5 million) net profit for 2009 — a strong turnaround from a $US54.7 million loss last year which was affected by a $US75.6 million charge against the gold hedges.

Company Profile

Brockman Resources (BRM)

Shares in iron ore miner
Brockman Resources
shares have risen per cent 15 per cent so far this month, driving the stock to a nine-year high of $3.29 on February 24.

Most iron ore stocks have been pushed up this week by a 4.6 per cent increase in the iron ore spot price on Monday.

Brockman’s developing iron ore project Marillana received a massive boost as it announced on Wednesday that definitive metallurgical test work confirmed iron ore mineralisation at the site could be upgraded to a final direct shipping ore quality at a grade above 60 per cent iron.

Marillana is 100 kilometres north-west of Newman in the Pilbara region of Western Australia and lies close to rail, road and port infrastructure.

In the past week, Brockman and its North West Iron Ore Alliance member companies Atlas Iron and FerrAus have lodged an application with the Australian Competition and Consumer Commission to be allowed to collectively bargain with any of the three iron ore miners, BHP Billiton, Rio Tinto and Fortescue Metals, on terms and conditions, including price, for either haulage services or access to the rail lines.

Despite the stock reaching Patersons Securities’ target price of $3.29, the broker still likes Brockman and has a “buy" recommendation on it.

Medusa Mining (MML)

Gold miner
Medusa Mining
may have lifted its net profit by 201 per cent only on Wednesday but investors have been expressing confidence in the company well ahead of the announcement.

Shares in the gold miner have risen 14 per cent already this month ahead of the result which included a record $US28.3 million profit in the six months ended December 31.

Revenues rose 161 per cent, to a record $41.3 million from $15.8 million, driven by increased gold production and a higher price received on sale of gold.